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A payday loan by any other name is still a raw deal for consumers. That’s the message watchdog groups have in response to the growing number of short-term, high-cost loans being offered by banks and even credit unions. Since regulatory changes have cracked down on other bank moneymakers like overdraft and interchange fees, financial institutions are looking for new revenue streams. The result is that payday loans are now going mainstream.

“Overall, it’s pretty dangerous that banks are getting into this business,” says Lauren Bowne, staff attorney at Consumers Union. “Payday loans have proven to be a relatively unsafe product. There’s no underwriting done and the interest rates are absolutely astronomical when annualized,” she says.

An article in the Los Angeles Times notes that major banks such as Wells Fargo now offer payday loans. Even a bank spokeswoman quoted by the paper admits these loans are “an expensive form of credit.”

Many institutions that now offer payday loans call them something else, or may classify them as a line of credit instead of a loan, but advocates say the semantics don’t obscure the true nature of these products. “It walks and talks just like a payday loan,” says Kathleen Day, spokeswoman for the Center for Responsible Lending, adding that she wants regulators to treat them as such.

Earlier this year, Consumer Financial Protection Bureau director Richard Cordray promised that the agency will take a closer look at payday loan business practices. The CFPB wants to make sure customers aren’t getting taken for a ride on what they believe will be a short-term fix to a cash-flow crunch.

CRL’s Day says that the short-term nature of payday loans is deceiving; the duration masks the fact that the cost of the loan is equivalent to triple-digit APRs, and many borrowers find that these loans rope them into months’ worth of debt a few weeks at a time. It’s typical for repaying the loan to cost more than twice as much as the original amount borrowed.

Advocates are especially concerned about the adoption of payday loan programs by credit unions. In the wake of consumer ire over big bank fees, many of them turned to credit unions. “I think people have an innate trust of credit unions,” Bowne says. Offering payday loans that trap people in a cycle of debt could rapidly erode that trust. “It really legitimizes this dangerous, fringe financial product,” she says.

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A payday loan (repaid on time which everyone can do because it's PAY DAY) is cheaper than negotiating an overdraft, and a LOT cheaper than extending an overdraft. The flawed research is that which treats everyone as if they stumble into these situation cos they can't add up.